2016 Q3 AGI Financial Report

Ag Growth International Inc.
Notes to unaudited interim condensed consolidated financial statements
[in thousands of Canadian dollars, except where otherwise noted and per share data]
September 30, 2016
On redemption or at maturity, the Company may, at its option, elect to satisfy its obligation to pay the principal
amount of the 2013 Debentures by issuing and delivering common shares. The Company may also elect to
satisfy its obligations to pay interest on the 2013 Debentures by delivering common shares. The Company does
not expect to exercise the option to satisfy its obligations to pay the principal amount or interest by delivering
common shares. The number of any shares issued will be determined based on market prices at the time of
issuance.
The Company presents and discloses its financial instruments in accordance with the substance of its
contractual arrangement. Accordingly, upon issuance of the 2013 Debentures, the Company recorded a liability
of $86,250, less related offering costs of $3,847. The liability component has been accreted using the effective
interest rate method, and during the nine-month period ended September 30, 2016, the Company recorded
accretion of $660 [2015 – $621], non-cash interest expense relating to financing costs of $567 [2015 – $532] and
interest expense of $3,396 [2015 – $3,396]. The residual value assigned to the holder’s option to convert the
2013 Debentures to common shares in the total amount of $4,480 has been separated from the fair value of the
liability and is included in shareholders’ equity, net of income taxes of $1,134 and its pro rata share of financing
costs of $211.
2014 Debentures
In December 2014, the Company issued $51.8 million aggregate principal amount of extendible convertible
unsecured subordinated debentures [the “2014 Debentures”] at a price of $1,000 per 2014 Debenture. The 2014
Debentures bear interest at an annual rate of 5.25% payable semi-annually on June 30 and December 31. The
maturity date of the 2014 Debentures is December 31, 2019.
Each 2014 Debenture is convertible into common shares of the Company at the option of the holder at any time
on the earlier of the maturity date and the date of redemption of the 2014 Debenture, at a conversion price of
$65.57 per common share being a conversion rate of approximately 15.2509 common shares per $1,000
principal amount of 2014 Debentures. No conversion options were exercised during the nine-month period ended
September 30, 2016 [year ended December 31, 2015 – nil]. As at September 30, 2016, AGI has reserved
789,233 common shares for issuance upon conversion of the 2014 Debentures.
The 2014 Debentures are not redeemable before December 31, 2017. On and after December 31, 2017 and
prior to December 31, 2018, the 2014 Debentures may be redeemed, in whole or in part, at the option of the
Company at a price equal to their principal amount plus accrued and unpaid interest, provided that the volume
weighted average trading price of the common shares during the 20 consecutive trading days ending on the fifth
trading day preceding the date on which the notice of redemption is given is not less than 125% of the
conversion price. On and after December 31, 2018, the 2014 Debentures may be redeemed, in whole or in part,
at the option of the Company at a price equal to their principal amount plus accrued and unpaid interest.
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